Suchergebnisse

Beaudry and Portier (2006) propose an identification scheme to study the effects of news shocks about future productivity in vector error correction models (VECMs). This comment shows that, when applied to their VECMs with more than two variables, the identification scheme does not have a unique solution. The problem arises from a particular interplay of cointegration assumptions and long-run restrictions. (JEL E32, E44, G12, G14)

We assume that domestic (foreign) agents, when investing abroad, can only trade in the foreign (domestic) risk-free rates. In a preference-free environment, we derive the exchange rate volatility and risk premia in any such incomplete spanning model, as well as a measure of exchange rate cyclicality. We find that incomplete spanning lowers the volatility of exchange rate, increases the risk premia but only by creating exchange rate predictability, and does not affect the exchange rate cyclicality. (JEL E32, F31, F44, G15)

Previous research using national‐level time‐series data has shown a breakdown in the poverty/growth nexus during the 1980s and a rehabilitation during the 1990s. This article uses census division‐level data with controls for demographic and structural variables to demonstrate that poverty rates were more responsive to macroeconomic conditions during the 1980s than prior results have shown and that conclusions regarding the rehabilitation of the relationship during the 1990s are sensitive to the time period chosen. (JEL E32, I32)

Este trabajo extiende el modelo presentado en Talvi y Végh (2005) para la determinación de la política fiscal óptima, introduciendo características del tipo agent-based. Al igual que en Talvi y Végh (2005), el marco teórico es a la Barro (1979), pero en el modelo aquí presentado la formación de expectativas racionales está asociada a costos que dependen de la complejidad del sistema. Los agentes pueden elegir dos tipos de estrategias para la formación de expectativas: "comprar" la observación en cada período correspondiente al proceso de expectativas racionales, o seguir la tendencia sin pagar ningún costo. A diferencia de Talvi y Végh (2005), se muestra que la prociclicidad de la política fiscal no es necesariamente la conducta óptima del gobierno. ; This paper extends the Talvi and Végh (2005) model on the behavior of fiscal policy, introducing agent-based issues. Like in Talvi and Végh (2005), the theoretical framework is à la Barro (1979), but rational expectations are costly. The agents can choose between two strategies in forming expectations: buying costly rational expectations or freely following the trend. Unlike Talvi and Végh (2005), I show that procyclicality of fiscal policy is not necessarily the government s optimal behavior. ; Instituto de Investigaciones Económicas

This paper studies the business-cycle fluctuations predicted by a two-sector endogenous-business-cycle model with sector-specific external increasing returns to scale. It focuses on aspects of actual fluctuations that have been identified both as defining features of business cycles and as ones standard real-business-cycle models cannot explain. For empirically realistic calibrations of the degree of returns to scale, the results suggest that endogenous fluctuations do not provide the dynamic element that is missing in existing real-business-cycle models. (JEL E32)

How much ability does the Fed have to stimulate the economy by cutting interest rates? We argue that the presence of substantial debt in fixed-rate, prepayable mortgages means that the ability to stimulate the economy by cutting interest rates depends not just on their current level but also on their previous path. Using a household model of mortgage prepayment matched to detailed loan-level evidence on the relationship between prepayment and rate incentives, we argue that recent interest rate paths will generate substantial headwinds for future monetary stimuli. (JEL E32, E43, E52, E58, G21, G51)

We use producer-level data to evaluate the role of financial frictions in determining total factor productivity (TFP). We study a model of establishment dynamics in which financial frictions reduce TFP through two channels. First, finance frictions distort entry and technology adoption decisions. Second, finance frictions generate dispersion in the returns to capital across existing producers and thus productivity losses from misallocation. Parameterizations of our model consistent with the data imply fairly small losses from misallocation, but potentially sizable losses from inefficiently low levels of entry and technology adoption. (JEL E32, E44, F41, G32, L60, O33, O47)

Over the business cycle young workers experience much greater volatility of hours worked than prime-aged workers. This can arise from age differences in labor supply or labor demand characteristics. To distinguish between these, we document that, for young workers, both the cyclical volatilities of hours and wages are greater than those of the prime-aged. We argue that a general class of models featuring only age-specific labor supply differences cannot reconcile these facts. We then show that a simple model featuring labor demand differences can. (JEL E32, J13, J22, J23, J31)

Debt and equity issuance are procyclical for most size-sorted firm categories of listed US firms and the procyclicality of equity issuance decreases monotonically with firm size. At the aggregate level, however, the results for equity issuance are not conclusive due to different behavior of the largest firms, especially those in the top one percent. During a deterioration in economic conditions, firms limit the impact of the reduction in external financing on investment by shedding financial assets. This is true for a worsening in aggregate as well as firm-specific conditions. (JEL E32, G32, L11, L25)

The early 1990s in the United States were years of sluggish economic growth alongside a sharply lowered federal funds rate, leading analysts to conclude that monetary policy must have been rendered ineffective by external influences. One previously popular monetary policy indicator not used to analyze the period was real M2, as it was widely considered to have been distorted since the early 1980s. This paper argues that it was a serious mistake to ignore M2 in the early 1990s since it never forecast (relatively or absolutely) better and helps explains this otherwise puzzling period very well. (JEL E32, E51, E52)

We study a business cycle model of the international monetary system featuring a time-varying demand for safe dollar bonds, greater risk-bearing capacity in the United States than the rest of the world, and nominal rigidities. A flight to safety generates a dollar appreciation and decline in global output. Dollar bonds thus command a negative risk premium, and the United States holds a levered portfolio of capital financed in dollars. We quantify the effects of safety shocks and heterogeneity in risk-bearing capacity for global macroeconomic volatility, US external adjustment, and policy transmission, as of dollar swap lines. (JEL E32, E43, E44, E52, F44, G11, G15)

This paper proposes a flexible-price theory of the role of money in an economy with incomplete idiosyncratic risk sharing. When the risk premium goes up, money provides a safe store of value that prevents interest rates from falling, reducing investment. Investment is too high during booms when risk is low, and too low during slumps when risk is high. Monetary policy cannot correct this: money is superneutral and Ricardian equivalence holds. The optimal allocation requires the Friedman rule and a tax/subsidy on capital. The real effects of money survive even in the cashless limit. (JEL E32, E41, E43, E44, E52)

We investigate the relationship between public debt ratios and per capita output using episodal data. Episodes of debt and depression occur far more frequently than expected. Growth is lower during episodes of low, moderate, and high debt ratios; while debt ratios are higher during depressions. We look at precedence of entries and exits in overlapping episodes, and the decomposition of the debt ratio during intervals just before and after overlaps. Output movements influence the debt ratio more during exit than entry. Debt movements often precede depressions. Developing countries account for these results almost exclusively. (JEL E32, E62, O47)

El presente artículo, siguiendo a Alonso Neira, Rallo Julián y Philipp Bagus, describe sistemáticamente los antecedentes teóricos de la incidencia de la política monetaria en los ciclos económicos, considerando que los economistas han tratado de explicar porqué la Producción muestra ciclos de duración variable. Esta explicación intenta determinar tres aspectos: 1) Qué tipo de perturbación –exógenao endógena, real o monetaria– golpea a la producción generando ciclos; 2) qué canales de transmisión expanden esa perturbación por todo el sistema económico; y 3) qué factores inciden en la persistencia del ciclo económico, convirtiendo es aperturbación en ciclos de mayor amplitud y resistencia.Clasificación JEL: E32

Countercyclical risk aversion can explain major puzzles such as the high volatility of asset prices. Evidence for its existence is, however, scarce because of the host of factors that simultaneously change during financial cycles. We circumvent these problems by priming financial professionals with either a boom or a bust scenario. Subjects primed with a financial bust were substantially more fearful and risk averse than those primed with a boom, suggesting that fear may play an important role in countercyclical risk aversion. The mechanism described here is relevant for theory and may explain self-reinforcing processes that amplify market dynamics. (JEL E32, E44, G01, G11, G12)